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The chairman of Sony BMG Rolf Schmidt-Holtz has admitted the music giant is in early talks with file sharing network Grokster.

Schmidt-Holtz said the technology was too popular to ignore and needed to be brought into a legal framework. He said: "I'm not negotiating myself, as Sony BMG chairman, but I know some staff members are at the very beginning of talks with Grokster."

The comments were made during a panel discussion at a T-Online event in Germany, according to Reuters. He said: "We are noticing that there is huge demand for services like that, and our intention is to transfer this demand into legal channels. Only then it would make sense for us."

Bertelsmann, before the Sony takeover, did a deal with Napster, then king of the peer-to-peer networks, much to the horror of the rest of the music industry.